Austin Airbnb lawsuit shows local control battle alive and well

Sometime this fall, a case will be heard before Texas’ Third Court of Appeals that could decide the fate of an Austin City Council ordinance that tightly restricts and, by 2022, will do away with many short term rentals in the city.

The ordinance, which went into effect on March 5, 2016, was a solution to a problem that didn’t and doesn’t exist, that penalizes property owners and visitors to the city, and gives the city government a “chilling” authority over private property and personal privacy on that property, Rob Henneke says.

Henneke is the lead counsel in the lawsuit headed to the Court of Appeals and the director of the Texas Public Policy Foundation’s Center for the American Future, whose mission is “launching challenges to government overreach at the administrative, district and appellate court levels.”

“I think this lawsuit is a starting point for pushback on the need for a law for absolutely everything,” Henneke told The Texas Monitor. “There was a deliberate unwillingness on the part of the city to compromise. You could see that in the debacle of ride sharing regulation and the embarrassment it brought the city until it was done away with.”

Austin’s debacle was not done away with by the City Council, or by lawsuit, but by an act of the Texas Legislature in 2017. “What today really is,” Gov. Greg Abbott proclaimed as he signed House Bill 100, “is a celebration of freedom and free enterprise.”

During that same session, Senate Bill 451, which would have done away with Austin’s kind of restriction and banning of short term rentals statewide, passed in the Senate but failed to be put to a vote in the House.

The failure of the bill by state Sen. Kelly Hancock, R-North Richland Hills, exemplified the struggle cities across the country are having contending with the boom in the short term rental industry driven by technology and the states’ response to overreach by their cities.

When asked if Hancock — who could not be reached to respond to questions — intended to file a similar short term rental bill in the next session, his communications director, Caity Jackson, told The Texas Monitor on Friday only that “we’re closely monitoring the issue.”

Should any Texas lawmaker consider such a bill, they should be prepared for a fight from city governments. During the scrum over Hancock’s bill, Bennett Sandlin, executive director of the Texas Municipal League issued a statement saying “Airbnb is trying to ram through the Legislature their special interest law to ban cities from adopting rules to deal with growing citizen complaints about the company’s hotel operations in residential neighborhoods.

“Airbnb is just another out-of-state company trying to force all Texans to conform to the way they want to run their business and escape accountability for paying local taxes and obeying local rules,” Sandlin wrote.

Sandlin told The Texas Monitor on Friday he fully expects a similar bill or bills to be filed in the upcoming session. “I don’t think the local control issue is going away,” he said. “Never, until the last two sessions, has there been more of this attitude that the state knows best. And it’s not just here. I’m hearing from my counterparts. This is happening nationally.”

The National League of Cities has also editorialized against the states handcuffing the cities’ ability to regulate short term rentals and the problems they bring.

The problem is: what little research has been done has shown there is relatively little problem to regulate. Sandlin said during hearings over Hancock’s bill, the eyes of some legislators were opened by ”horror stories of non-stop, round-the-clock partying, Animal House kind of partying,” told by Austin neighbors.

However, in preparing for his lawsuit, Henneke made a record request for all short term rental complaints in Austin since the first modern ordinance was passed in 2012. Henneke said he found 31 noise complaints, and of the total, only five complaints serious enough that they were referred to municipal court for punitive action.

“I don’t even want to get into the numbers,” Sandlin countered. “Deciding on the number that determines a problem should best be determined at the city level, not at the legislative level.”

At the city level in Austin, Henneke says, there has never been a commitment to enforce the reasonable ordinances already on the books before the crackdown ordinance of 2016.

“The city has no staff to respond to noise complaints after about 5:30 pm and it’s well known that APD (the Austin Police Department) won’t respond to noise complaints at all,” Henneke said.

The ordinance goes much further, imposing limits on the numbers of people who can be in or on short term rental properties at any one time. If six people are playing 3-on-3 basketball on a short term rental home court they are in violation of the ordinance. If those six people are together in the home after 10 pm, they are also in violation.

And come April of 2022 you will not be able to operate a short term rental unless you are the occupant as well as the owner.

“What’s been ignored is the ordinance allows for code compliance to come in at any time — day or night — to inspect,” Henneke says. “That aspect should make all of us take pause. Do we want to start a trend of the city being allowed to go into our homes?”

The Center for the American Future raises issues of constitutionality in telling the story of Ahmad and Marwa Zaatari, a Lebanese immigrant couple who came to the center to fight to protect their right to operate their rental. The suit was filed in June of 2016.

In October of 2016, Texas Attorney Gen. Ken Paxton intervened on behalf of the Zaataris and three other couples who joined in the lawsuit. In March, Paxton filed a 102-page brief in their support with the Third Court of Appeals.

Recent case law in Houston suggests that the appeals court may be receptive to the property rights argument outlined in Henneke’s suit. The suit is being watched 75 miles south, where San Antonio leaders are wrestling with the kind of regulation they want for short term rentals.

Nationally, Airbnb, the largest and fastest growing home sharing platform has stressed cooperation with city governments. “We really sought to work with governments to regulate home-sharing,” Christopher Nulty, the company’s public affairs director, said recently, “We think the best way to… ensure that home-sharing is a long-term part of cities is to regulate it.”

That kind of cooperation opened the door last week for Airbnb and others to operate legally for the first time in Charleston, S.C. The city, however, will not license homes that are not owner occupied.

The refusal by the city of Nashville to allow most rentals not owner occupied has resulted in a bill undoing the regulations that appear on its way to passage in the Tennessee legislature.

Henneke says their lawsuit has steered away from making any sweeping statements. There has been no challenge to the fundamental legitimacy of some regulation in Austin.

“I think we’ve correctly put forward the case for people who have put their time, treasure and sacred honor into building these businesses,” Henneke says.

Mark Lisheron has more than 30 years of experience in newspapers and was most recently the managing editor for Reason.com. He also served as deputy editor, national reporter and Austin bureau chief for Watchdog.org. He was the founding Austin bureau chief for the bureau's predecessor, Texas Watchdog, winning the First Amendment Award from the Society of Professional Journalists in Texas.